SF's Cannery in the Can, Owners Default on $18 Million Loan

It looks pretty in the marketing shots and I'm sure the tourist mags paint it as one of San Francisco's finest landmarks but let me tell you as a person who used to work in the area, The Cannery is really nothing to write home about. Shoe Biz went out of business ($400 boots must not be hot items for the fanny-packed Europeans shuffling through the Wharf) and the Cannery, last time I saw it, is just another piece of overpriced land squatting in SF drawing flies and Eurotrash. There may be a coffee joint in there but it's a hard sell to put any retail at the Wharf at this point (Ask Steve and Barry's, who could barely squeeze out a year in the area before liquidating) unless the product is multi-colored San Francisco fleeces.

And that particular trick belongs to the family that runs Kennedy's Irish Pub/Curry House but let's not get into that, lest JDA get a beatdown by the SF fleece pushers in Tourist Central.

The Cannery, whose owners had reportedly defaulted on an $18 million loan, is for sale, according to a knowledgeable real estate source.

The tourist and shopping center's financial woes were first reported in Wednesday's Wall Street Journal. The paper said New Jersey's Vornado Realty Trust, the lead investor of a group that paid $33.5 million in 2007 for the 103-year-old property, was looking to restructure an unpaid loan of up to $18 million, in what was said to be "a calculated move."

In a May 4 filing with the Securities and Exchange Commission, Vornado requested that the mortgage loan on a California retail property with a principal balance of $17.5 million be placed with a special servicer.

“We have not made debt service payments since March and are in default. We are in negotiations with the special servicer; there can be no assurance as to the timing and ultimate resolution of these negotiations,” the filing stated.

A call to the Palmer Team was not returned.

Vornado bought the Cannery in early 2007 from Chris Martin, whose family had owned the property since the 1960s. Martin was forced to sell the complex after the property’s anchor tenant, the law firm Coudert Brothers LLC, filed Chapter 11 bankruptcy and stopped paying its $70-a-square-foot rent.

At the time Martin said “it is only with regret that we have to sell,” but given the economic realities he had no choice. Martin had spent $8 million on building out space for the Coudert Brothers and was unable to meet his loan obligations. At the time the law firm owed Martin $15 million.

And all because Alan Greenspan couldn't stop with the easy money. Such a shame. But hey, there's nothing wrong with commercial real estate, right?

Disclosure: We smoke the green shoots here in San Francisco, and all of California for that matter.